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2015 (9) TMI 852 - CALCUTTA HIGH COURTAssessment of the rental income - claim of deduction of amount paid to tenant for vacating the property - earlier assessee was showing the income as house property income - res-judicata - this year the income was shown as business income - whether under the head 'business' or under the head 'house property' - Held that:- Though as noted, in earlier assessment years the appellant had shown rental income as "income from house property", however, in this assessment year it has claimed rental income as business income, in view of the object as set out in clause 4 of the memorandum. Though before the Tribunal the Memorandum was relied on to put forward the case that the income was part of the business and payment of compensation was to earn higher income, it was not at all considered. Since in this assessment year the appellant had claimed rental income as business income, and as previously there was no adjudication or decision considering the Memorandum, and as being the owner of the premises, payment of compensation - the expenditure - was wholly and exclusively for commercial expediency. it earning and was revenue in nature. Since compensation was paid by the appellant, the landlord of the premises, to obtain possession from the lessee/tenant so as to earn a higher rental income, it had arisen out of business necessity and commercial expediency. Since there was no question of acquiring a property it cannot be said that the payment made was for having a benefit of enduring nature. Rather the compensation was paid to the existing tenants to have their portions vacated to have new tenants with higher rent and thus to have a higher rental income which was a business activity permitted by the Memorandum.Assessing Officer has to assess the income of an assessee after considering whether the figure in the return is taxable or not and then to determine the tax in accordance with law. In determining the same, a decision has to be reached on the issue raised. Unless a decision is reached, it cannot be said that the issue was adjudicated or decided. Keeping these principles of law as formulated by the Courts in mind, the finding by the Assessing Officer and Tribunal that declaring the rental income under the head "income from house property" precludes the appellant from calming deduction cannot be accepted as Memorandum permitted it to carry on business of letting out properties and indisputably it was carrying on business in letting out properties and in carrying on such trading activity had paid compensation. The observation of the Tribunal that the appellant had all along, including in this assessment year, had shown the income under "Income from house property" cannot be a ground for denial of the deduction as in the earlier assessment years never an occasion arose for adjudication or decision on the said issue Hence, as the appellant, being the owner of the property, was carrying on business and had paid compensation for deriving higher rent which was in tune with the Memorandum – a fact which was not at all considered by the Assessing Officer and the Tribunal, the question no.1 is answered in the negative, against the Revenue and in favour of the Appellant. The question no.2 is answered in the affirmative, against the Revenue and in favour of the Appellant.
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